As income increases, so does the cost of living unless you can control these costs. And if you can't control expenses, you won't have enough money on hand for savings and investments.
A practical example of this is that you are now earning more than you did a few years ago. Even after earning more, you don't have money for savings at the end of the day. Because your costs have increased. And the financial problems that exist in our lives remain.
no matter how much money people earn,
they tend to spend the entire amount and a little bit more besides.
Their expenses rise in lockstep with their earnings. - Parkinson’s Law
As our income increases, we start spending more than we need to. But our financial success depends largely on keeping expenses under control. If your income increases by 20% per year, your expenses should not increase by more than 5%.
At one time, your income was $500 a month, and now it's $5,000. But you are not saving money according to your income!!! There are very few people who can understand money management and spend accordingly. The money you save today will save in the future.
There is a saying in economics - less spending means more income.
Let's learn about Kakeibo, a Japanese method of saving money in Japan. If you want to budget in the Kakeibo method, first, you have to ask yourself four questions -
What is the minimum amount you have to spend?
How much money are you currently spending?
How much money do you want to save?
How can you save more?
These four questions will help you formulate your monthly budget.
The next step is to divide your expenses into four categories. They are -
Needs - This sector includes your mandatory expenses, which you must incur. Such as house rent, market expenses, utility bills, these expenses you have to do even if you do not want to.
Wants - This list contains the names of all the things that you should not buy now, but you want to! For example - you will do new decoration at home, or buy another phone even though you have one. These things are a lot like luxury items.
Culture - We are social beings, and to be in society, we have to maintain our socialities, such as the cost of going out or eating with relatives or friends, or other social expenses.
Unexpected - Nothing in life is guaranteed; you don't know what will happen in the future. You may need emergency money for any need at any time, such as - medical expenses.
If you plan this budget at the beginning of each month, you will know how much your entire month will cost. With this budgeting, you can understand how much money you can spend in any sector and how much money you can save at the end of the month.
At last, let me input some of my tips to save money. Well, I'm not Warren Buffett or any financial adviser. I am just writing down some basic tips that I think are needed for myself as well.
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